Locally, as pension funding rises, revenues decline

By Rick Rouan

Valley governments paid $137M into funds in 2008.

The story in 2009 for most local governments and school boards in the Mahoning Valley was the same: Revenue streams are running dry. Layoffs are imminent. Cost-cutting is at a premium.

Those political subdivisions face uncertain financial futures, but one expense is still untouchable.


In 2008, municipalities in Mahoning, Trumbull and Columbiana counties paid more than $137 million into the five pension funds for public employees, and that number is expected to grow by more than $10 million in the next five years, according to an Ohio Newspaper Organization analysis of state data.

At the same time, the private-sector taxpayers who help fund the budgets find themselves reeling from the blow dealt by the recession of recent years.

Some private companies have sold off pensions, and retirees find themselves in limbo or, in some cases, without the benefits once promised to them.

But the decision-makers who deal in government budgets say increases to their contributions are unlikely. To make its projections, the Ohio newspaper study uses data from 2003 to 2008, which does not necessarily include the economic troubles that continued last year, they say.

Pension contributions are often a large proportion of the budgets for local governments and schools. For example, contributions to the Public Employee Retirement System accounted for 16 percent — about $10.8 million — of the Mahoning County government’s budget in 2008.

The numbers are also directly related to payroll. Every public entity is mandated by state law to contribute a percent of payroll to the pension funds, and, in some cases, unions have bargained for employers to pick up part of the employee share in lieu of pay raises and other benefits.

Many of those contracts were negotiated before the biggest economic downturn since the Great Depression. Now, facing declining support from the state and dwindling interest income from investments, local governments could be looking to minimize contributions in the future.

“I think to achieve a balanced budget next year, it’s unfair for anyone to assume that everything is not on the table,” said George J. Tablack, Mahoning County administrator.

Mahoning County faces “at least $3 million in additional cuts” in 2010, and it could be more if concessions from 2009 are not extended, said Tablack, who is also the county’s budget director.

In 2008, the county approved a $67.5 million budget, and that was shaved to about $62 million in 2009. At a meeting Tuesday, commissioners approved a one-month temporary budget as administrators try to negotiate further concessions and trim the 2010 budget even more.

Given the cuts, Tablack said that he does not anticipate substantial increases in the amount the county pays into pension funds for its employees.

“I would expect those to flatline or perhaps even decline,” he said.

The cost of Trumbull County’s group-insurance plan is projected to increase more than 13 percent in 2010, said Jim Keating, county personnel director, adding that the pension funds likely see similar increases.

To cope with the increased expenses, two of the five pension funds are asking state lawmakers to increase the amounts both employers and employees are required to pay into the system.

The State Teacher Retirement System wants to increase each group’s share by 2.5 percent, up from 14 percent for employers and 10 percent for employees. Ohio Police and Fire wants to increase from 10 percent to 12 percent the employee contribution. It also wants employer-contribution rates to increase from 19.5 percent to 25 percent for police and from 24 percent to 25 percent for fire.

Increasing the burden on taxpayers, though, isn’t fair in a time when local governments are cutting the services they provide, said Patricia M. Takacs, a Delphi Corp. hourly retiree.

Takacs and her husband both worked at Delphi, where they paid into pensions that were ultimately dumped into the Pension Benefit Guaranty Corporation, a federal corporation that protects pensions but limits the monthly payout to retirees.

On average, about 16 percent of people who have their pensions turned over to the PBGC see a benefit reduction averaging 28 percent, according to www.MarketWatch.com.

“I want people to get what they’ve earned and what they contractually bargained to get, as we did, but I have to tell you, it makes my heart hurt,” Takacs said of the potential increases.

Takacs said she and her husband, who retired early from Delphi after 35 years of service, now struggle to make ends meet. That includes, Takacs said, paying taxes.

“[We] are struggling to pay our taxes to fund that pension while our pension is a nightmare,” Takacs said. “And then they don’t have the money for the services. Where is the equal balance?”

Increases to the amount employers and employees are required to pay into STRS will hit school districts twice as unions try to bargain for higher wages to offset the increase to the employee share, said Angela Lewis, treasurer of the Warren City School District.

“They’re mandating this, but we don’t have additional money to offset that,” Lewis said. “It’s going to eat into the general fund.”

The Youngstown City School District, which is in fiscal emergency, would have to make more cuts if faced with such an increase, Treasurer William Johnson said.

An analysis of the amount the school district pays into pensions shows that it is on pace to reduce its contributions to STRS pensions by 27 percent and to also limit contributions to SERS pensions. The district has cut payroll from around $55 million in 2007 to about $42 million in 2009, Johnson said.

Johnson said he hopes that trend reverses because it would mean the district has overcome some of its current financial problems.

“It’s not going to be a trend that just has an infinite continuum. It’s going to slow down or uptick,” he said. “Everybody hits the bottom eventually.”

The city of Youngstown also is downsizing, not growing.

Faced with a budget hole totaling more than $1 million in 2009, the city will eliminate through attrition as many as 12 police positions over the next two years, said Kyle Miasek, the city’s deputy finance director.

Following current trends, though, the city’s pension obligations are expected to grow by about 11 percent, from about $7.6 million in 2008 to about $8.5 million in 2013, data show.

“Is 12 percent outrageous? I don’t know if it’s outrageous, but I don’t know if we’ll grow at that clip,” Miasek said. “We’re going to grow because of wage increases, but we’re not going to grow because of head count.”


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